Income investing using real estate has become some of the most popular methods for income over time, but there are plenty of questions and confusing specifics surrounding various types of investment approaches. Non-Traded Real Investment Trusts (REITs) are amongst the most perplexing variants, as they differ drastically from most other investment types. So, how can one sell Non-Traded REITs?
Non-Traded REITs may be sold back to the REIT if possible. They can be sold on the secondary market for non-listed REITs, limited partnerships, and alternative investments, where sellers are matched with buyers. Since REITs are usually illiquid, there are restrictions on selling Non-Traded REITs.
We have helped investors recover losses from non-traded REITS because many were unaware of the risks and liquidity issues. Most investors don’t know that non-traded REITs are not listed on national or public exchanges, which means that the selling process is typically different from many other shares. Join us as we discuss Non-Traded REITs, how to sell them, and other specifics to be aware of before you make any financial decisions.
If you need help regarding a non-traded REIT or any investment, please call our investment fraud attorneys for a free consultation at 1-800-856-3352
What is REIT?
Table of Contents
Real estate investment trusts (REIT) are organizations a trust or governing organization that owns profitable real estate. Real estate funds pool the assets of investors for the purchase of property portfolios. There are two types of public REITs: the ones that are exchanged with the nation’s exchange or the ones that are not on national exchanges. Nontraded REITs are the ones that cause most of the problems for investors due to risk.
Each year the REIT must share at least 90 percent of its taxable income with stockholders. These distributions can be subject to tax to the extent of any ordinary income and capital gains involved in the distribution taxable to the extent of capital gains and income and gains received in the distribution paid to shareholders.
What is a non-traded REIT?
Real estate investment trusts (REITs) are companies operating income-producing real estate assets from a variety of asset segments financed in some areas. Many investors do not no know the difference between non traded REITs vs traded REITs. Some may call them nonlisted REITs. The big difference is that non-traded REITs are not traded on the national stock exchange.
These funds are often not liquid and may remain in circulation for at least eight years following purchase time. The director or trustees of the REIT may suspend and/or stop distributions for certain time periods. Have your stock trading or REIT sales declined or are unable to renew shares of this company? Contact us today with questions on our recovery process.
Are non-traded REITs risky?
Many investors have reported being sold unsecured securities such as REITs without clearly understanding the risks of such investments. They have considered it a REIT scam. Stockbrokers and financial advisors have a duty to disclose all risks associated with their investments.
If you lost money or feel trapped by a REIT, you can be a victim of REIT fraud. You may have lost money due to broker fraud. Please contact us for a free portfolio review to help you recover your losses.
How To Sell Non-Traded REITs?
Non-Traded REITs do pose some benefits for shareholders, as they provide investors with access to normally inaccessible real estate investment products with tax benefits. Non-Traded REITs are still required to be registered with the SEC (Securities and Exchange Commission), need to make regular filings, and are subject to the same IRS requirements, including a minimum of 90% taxable returns to all shareholders.
Such investment approaches allow investors to diversify their portfolios by holding shares outside of the stock market. But, there are various limitations, risks, and restrictions surrounding the return on investment through growth and the ability to sell held Non-Traded REITs for profit.
Most non-traded REITs are supposed to be sold to accredited investors because they are risky investments. Many are private reit companies that are not registered (Unlisted REIT). Some might call them privately traded REITs.
Many people may experience a fair amount of difficulty when trying to sell their Non-Traded REITs since there are usually many restrictions concerning the redemption or selling of Non-Traded REITs. But, there are still a few ways you can sell your Non-Traded REITs.
Where to sell Non-Traded REITs?
One of the major drawbacks of non-traded REITS is liquidity. When investors want to sell them they must either sell them back to the REIT or on a secondary exchange. To make matters worse, REITs often halt the redemptions of their products. This forces investors to sell on secondary exchanges, often getting pennies on the dollar. These losses may be been prevented if the financial advisor and/or brokerage firm would have given the proper disclosures.
Selling Non-Traded REITs Back to the REIT
Investors may be able to sell their Non-Traded REITs back to the REIT while it is still open to the public. But, this approach generally leaves only around 60% – 85% of the initial value. Most REIT companies will not offer early redemption once the Non-Traded REIT is closed to the public.
Companies that do offer early redemption may require higher fees, which will ultimately lower the total returns. Redemptions in this manner are generally quite limited, occasionally pricing shares below the purchase price or even the current price. Additionally, such redemptions can be suspended by the REIT’s board of directors at any time.
This sort of approach has various limitations and vulnerabilities, but such redemptions should be considered if there happens to be a worthwhile opportunity. Although, investors’ money could be tied up in the REIT for quite some time, leaving little to no options for selling their Non-Traded REITs.
What to do if your REIT stops offering redemptions: Selling your REIT
REITs that stop making redemptions leave shareholders limited opportunities. Investors may choose to file a class action against a non-stock-based REIT or even individually file an FINRA arbitration claim against a REIT. These legal options vary in investors’ individual cases.
Speak with an experienced attorney for free to find out how you can recover your losses. Please contact us for a free consultation on recovering your losses at 1-800-856-3352
Selling Non-Traded REITs on the Secondary Market
If your REIT does not offer redemptions at all or has stopped offering them, investors can choose to sell their Non-Traded REITs on the secondary market. In some cases, REITs may perform poorly, or shareholders may have little to no other options for selling Non-Traded REITs.
Although, there is generally quite a hefty discount on expected returns with this approach. That being said, this approach does hold numerous benefits for Non-Traded REIT holders, such as decreased holding time periods and cash flow.
Liquidity Issues with Non-Traded REITs
Since Non-Traded REITs are not listed on public exchanges or traded on a securities exchange, they are fairly illiquid for lengthy periods of time. Non-Traded REITs can remain illiquid for many years (approximately eight years or more on average), as they are not traded on national exchanges.
They may not benefit from a steady or reliable income within the initial stages, and many distributions to Non-Traded REITs shareholders may be predominantly backed by borrowed funds. In some cases, Non-Traded REITs shareholder distributions may be backed completely by the capital provided by the REIT’s board of directors.
The expectation is that investors will see growth in their investment over time, benefitting from income from its real estate portfolio – of which rent is the most common income source. There are quite a few Non Traded REITs that are structured with a decisive time frame, which is put in place before the Non-Traded REIT must become listed on a national exchange or must liquidate.
The risks involved concern the fact that the Non-Traded REIT may have lost value to various degrees or may have become entirely worthless by the time this period has concluded. There is no guarantee of profit or protection from losses, and there are discrepancies concerning distribution payments. This is in addition to relatively high advisor costs and broker fees.
Non-Traded REIT Related Lawsuits
The upside to this dilemma is that if an investor is tied up in their Non-Traded REIT and happens to lose a significant amount of money compared to the initial investment, they may be able to pursue legal claims. Depending on the situation and eligibility, investors may be able to join a class action against the Non-Traded REIT or file an arbitration claim.
However, the available and applicable legal options will vary on a case-by-case basis, depending on each investor’s individual case. In order to pursue legal action and claim back losses for Non-Traded REITs, one would need to speak with a proficient attorney to establish if the case would have sufficient grounds to recover losses.
Our lawyers have opened investigations and filed lawsuits against some of the world’s largest companies on behalf of shareholders who have incurred losses in their Non Traded REITs. Such cases include those against Hospitality Investors Trust REIT, Benefit Street Partners REIT, Northstar Healthcare Income REIT, and The Parking REIT.
Suing Financial Advisors for Bad Non-Traded REITs
Depending on the nature of the individual investor’s case, they may be able to sue financial advisors and stockbrokers when they have incurred significant losses. There are many stockbroker and investment advisor REIT frauds, which entail lengthy investigations concerning the allegations. But, it may be possible to recover losses by consulting an experienced attorney.
Non-Traded REITs can be worthwhile, profitable, and can afford stability depending on the REIT. But, there is plenty of risk concerning projected returns and complexities surrounding the selling of Non-Traded REITs. Call us today to review your options at 1-800-856-3352.